Astrids Utility Function Is U(H A, C A)= H a C

question 56

Multiple Choice

Astrids utility function is U(H A, C A) = H A C A.Birgers utility function is min{H B, C B}.If Astrids initial endowment is no cheese and 5 units of herring and if Birgers initial endowments are 6 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market.This implies that

• A)6/(p + 1)+ 2.50 = 5.
• B)5/6 = p.
• C)6/p + 5/2p= 5.
• D)6/5 = p.
• E)min{5, 6} = p.

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Definitions:

Call Price

The price at which a callable bond can be redeemed by the issuer before its maturity date, typically higher than the face value.

Option Value

The inherent value of an option contract, determined by factors like the underlying asset's price, the strike price, and the time until expiration.

Gamma

The curvature of an option pricing function (as a function of the value of the underlying asset).

Option Price

The price at which the holder of an options contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.